2025 (7) TMI 145 - AT - Central Excise

Denial of interest on the pre-deposit amount - Section 35FF of CEA - HELD THAT - The amended provision came into operation on 06.08.2014 whereas appeal was filed subsequently on 01.07.2016 and pre-deposit was made in compliance of Section 35F as stood on 01.07.2016. The said proviso comes into play in respect of appeals which were decided subsequent to 06.08.2014 but the same were filed before 06.08.2014 and accordingly in such appeals pre-deposit was also made in terms of Section 35F as stood prior to commencement of Finance (No.2) Act 2014. However in case where appeal is filed subsequent to 06.08.2014 the pre-deposit is also made under the new Section 35F and accordingly the proviso to Section 35FF will not come into picture. In the present appeal as the appeal has been filed subsequent to 06.08.2014 therefore it cannot be said that the pre-deposit was made under Section 35F prior to the commencement of Finance (No.2) Act 2014. Unless an Order against which an appeal is filed is passed the question of making pre-deposit under Section 35F prior to commencement of Finance (No.2) Act 2014 does not arise. Thus in such cases where stage of pre-deposit came into effect after 06.08.2014 the deposit is made under new Section 35F only and thus the proviso will not operate. The interest on refund of pre-deposit is to be made from the date of deposit of such amount under the Section 35FF as effective from 06.08.2014. In any case the decision in the matter of Jeevan Diesels and Electricals Ltd. Vs. C. GST C. EX. Pondicherry 2019 (4) TMI 1554 - CESTAT CHENNAI relied upon in the impugned order has no applicability in the present matter because in that case pre-deposit was in old Section 35F (effective before 06.08.2014) as the appeal was filed in 2006 whereas in the present case the appeal has been filed after 06.08.2014 therefore it will be deemed that the pre-deposit was made and considered under the new Section 35F. This is also evident from the fact that no stay application could have been filed seeking waiver of pre-deposit further all the Appellant was required to comply to make mandatory pre deposit under the provision of new Section 35F after 06.08.2014. In such a view the pre-deposit was made only under the new Section 35F and accordingly the proviso to Section 35FF has no application thus interest is payable from the date of deposit only in terms of Section 35FF. Appeal allowed.

Summary

The core legal question considered by the Tribunal in this appeal is whether the appellant is entitled to interest on the pre-deposit amount of Rs.47,82,819/- made pursuant to Section 35F of the Central Excise Act, 1944, particularly in light of amendments introduced by the Finance (No.2) Act, 2014, and the proviso to Section 35FF governing interest on delayed refunds of such deposits.

Additional issues relevant to this core question include:

• The applicability and interpretation of the proviso to Section 35FF concerning pre-deposits made prior to the commencement of the Finance (No.2) Act, 2014;
• The legal effect of the date of filing of appeal vis-`a-vis the date of deposit in determining entitlement to interest;
• The relevance and binding nature of Circular No.984/8/2014-CX issued by CBIC clarifying the treatment of payments made during investigation and the refund of pre-deposits with interest;
• The applicability of precedent decisions, particularly the ruling in Jeevan Diesels and Electricals Ltd. v. CGST & CEX, Pondicherry;
• The procedural correctness in granting refund of pre-deposit and interest thereon.

Issue-wise Detailed Analysis

1. Entitlement to interest on pre-deposit amount under amended Section 35FF

Legal Framework and Precedents: Section 35FF of the Central Excise Act mandates payment of interest on delayed refunds of amounts deposited under Section 35F. The proviso to Section 35FF, inserted by the Finance (No.2) Act, 2014 effective from 06.08.2014, specifies that amounts deposited prior to this date continue to be governed by the earlier provisions of Section 35FF.

Court's Interpretation and Reasoning: The Tribunal observed that the appeal in question was filed on 01.07.2016, i.e., after the effective date of the amendment. Consequently, the pre-deposit of Rs.47,82,819/- was made under the new Section 35F, not the earlier version. The proviso to Section 35FF applies only to deposits made prior to 06.08.2014, which is not the case here. The Tribunal reasoned that the proviso cannot be invoked to deny interest on the pre-deposit amount when the appeal and deposit both occurred post-amendment.

Application of Law to Facts: Since the pre-deposit was made under the new Section 35F regime, the appellant is entitled to interest on the refund from the date of deposit till the date of refund as per the amended Section 35FF.

Treatment of Competing Arguments: The Commissioner (Appeals) had relied on the proviso to Section 35FF to deny interest, arguing that the deposit was made prior to the amendment. The Tribunal rejected this, clarifying that the appeal filing date governs the applicable provisions and that the pre-deposit was necessarily under the new Section 35F.

Conclusion: The appellant is entitled to interest on the pre-deposit amount from the date of deposit under the amended Section 35FF provisions.

2. Effect of Circular No.984/8/2014-CX on the date of deposit and interest calculation

Legal Framework: Circular No.984/8/2014-CX clarifies that payments made during investigation prior to filing appeal can be treated as deposits under Section 35F, subject to conditions. It further states that the date of filing appeal shall be deemed to be the date of deposit for the purpose of interest calculation under Section 35FF.

Court's Interpretation and Reasoning: The Tribunal acknowledged the Circular's deeming fiction but held it lacks statutory backing. The Tribunal emphasized that once an amount is considered a pre-deposit under the new Section 35F, the interest should accrue from the actual date of deposit, not merely from the date of filing appeal.

Application of Law to Facts: The appellant had deposited the amount prior to filing the appeal. Therefore, interest must be calculated from the date of actual deposit rather than the deemed date of filing appeal.

Treatment of Competing Arguments: While the Circular suggests the date of filing appeal as the deemed date of deposit, the Tribunal gave precedence to statutory provisions over administrative instructions, holding that interest accrues from the actual deposit date.

Conclusion: Interest on the refunded pre-deposit must be paid from the actual date of deposit under the new Section 35FF.

3. Applicability of precedent decision in Jeevan Diesels and Electricals Ltd. case

Legal Framework and Precedent: The Jeevan Diesels case dealt with pre-deposits made under the old Section 35F regime (prior to 06.08.2014) where the appeal was filed in 2006. The ruling held certain principles regarding interest entitlement on such deposits.

Court's Interpretation and Reasoning: The Tribunal distinguished the present case on facts and law, noting that the appeal here was filed post-amendment (2016). Therefore, the old Section 35F and its related jurisprudence do not apply. The Tribunal found the precedent inapplicable to the present facts.

Application of Law to Facts: Since the pre-deposit in the present case was under the new Section 35F, the principles from the Jeevan Diesels case are not binding.

Conclusion: The precedent cited by the Commissioner (Appeals) has no applicability, and the appellant's entitlement to interest stands unaffected by it.

4. Procedural correctness in refund of pre-deposit and interest

Legal Framework: Circular No.984/8/2014-CX mandates that where appeals are decided in favor of the appellant, refund of pre-deposit along with interest must be made within 15 days of the refund claim letter, irrespective of departmental appeals unless stayed by a competent authority.

Court's Interpretation and Reasoning: The Tribunal noted that the appellant had claimed refund after the appeal was allowed by the Tribunal. The refund of the entire pre-deposit amount was granted, but interest was denied on the Rs.47,82,819/- portion. The Tribunal held that this was contrary to the legal mandate and Circular instructions.

Application of Law to Facts: The appellant was entitled to refund with interest on the entire pre-deposit amount, including Rs.47,82,819/-, and the denial of interest on this portion was erroneous.

Conclusion: The refund with interest should be granted on the entire pre-deposit amount without discrimination.

Significant Holdings

"The proviso to Section 35FF shall not apply to deposits made under the new Section 35F post 06.08.2014, and therefore, interest is payable on such pre-deposits from the date of deposit till the date of refund."

"The deeming fiction in Circular No.984/8/2014-CX that the date of filing appeal shall be deemed to be the date of deposit has no statutory backing and cannot override the provisions of Section 35FF."

"Precedents applicable to pre-deposits made prior to 06.08.2014 are not applicable to appeals filed and deposits made after this date under the amended provisions."

"Where an appeal is allowed, refund of the pre-deposit along with interest at the prescribed rate must be made promptly, and denial of interest on any portion of the pre-deposit without valid legal basis is impermissible."

Final determination: The appellant is entitled to interest on the pre-deposit amount of Rs.47,82,819/- from the date of deposit under the amended Section 35FF, and the appeal is allowed accordingly with consequential relief.